Tech Titans Gather in Lisbon to Discuss Future of Finance - Essay Sample

Paper Type:  Essay
Pages:  6
Wordcount:  1507 Words
Date:  2023-03-27


Over three days in November, 70,000 big tech buffs and investors convened at a small town in Lisbon to discuss financial matters (Finance and Economics, 2019). The money managers reported a dazzling funding round (Finance and Economics, 2019). The panelists predicted a cashless future while gazing into a big crystal ball. The article tries to explain why every big tech company wants to look like a bank (Finance and Economics, 2019). For example, Amazon launched a credit card for underbanked shoppers, while Apple introduced its own credit card to provide a convenient means for clients to pay for products bought at the company (Finance and Economics, 2019). Facebook entering the cryptocurrency business through libra was also a major blow to the banking industry. In this section, it is evident that each of the giant company wants to have a payment structure similar to a bank (Finance and Economics, 2019).

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These big firms wanted to focus on payments, each in their own way. Apple Inc. and Google introduced Apple Pay and Google Pay as digital wallets respectively. These digital wallets help both firms to secure everything in one place and make payments more secure by "masking" client's information (Finance and Economics, 2019). Facebook has a convenient payment mode as their pay stores card are found in different software applications; Facebook, Messenger, Instagram, and WhatsApp (Finance and Economics, 2019). The only challenge with such a payment structure is limited success. For instance, Google Pay has just 12 million users in a potential consumer market of about 130million families (Finance and Economics, 2019). Approximately 15% of the nation's household population use Apple Pay at least twice a month. In September alone, the number of clients who used Amazon pay was just 5% of the number who used Paypal (Frost et al., 2019). The challenge of this limited success can be attributed to the requirement for every state to have a license in America (Finance and Economics, 2019). The article also states that lenders will also welcome Big Tech companies, and as they begin to develop consumer relationships, banks may be compelled to give away more information and fees. Limited profits may precipitate a wave of mergers and closures (Finance and Economics, 2019).

How Big Tech Companies are Disrupting Banking

The investment of Facebook in the world of cryptocurrency through the launch of Libra sent some strings of shockwaves through the tech industry (Finance and Economics, 2019). Big Tech companies have already started to embark on financial ventures, by introducing payment platforms that have ended up drawing more clients from the small and medium enterprises since they lend to them at cheaper rates than the banks (Finance and Economics, 2019). Facebook has benefitted from forging a partnership with Clear Bank to launch a package called charged, a program that helped the firm to gain revenues from providing financing for SMEs seeking to advertise their products (Finance and Economics, 2019).

As a disadvantage, no big tech company has been able to provide an elaborate financial context, because there are stern regulatory challenges facing customer deposits and opening of current accounts (Finance and Economics, 2019). The Wall Street Journal mentioned that Amazon was in deliberations with J.P. Morgan Chase to provide checking accounts, and Bloomberg also stated that Google had already gained a licence to operate an eMoney license in Lithuania (Finance and Economics, 2019). In China, big tech's violation of banking is apparent, with Tencent introducing WeBank back in 2014, and last year launching a credit scoring structure (Finance and Economics, 2019). It is evident that the effect of Silicon Valley seems likely to play an integral part in the future of banking (Finance and Economics, 2019).

Another advantage that big tech firms accrued from entering the banking industry are they will have an opportunity of getting significant data advantage over the banks or fintech firms (Financial Stability Board, 2019). These firms will be in a good position to obtain more data about their users, than the banks or fintech firms (Financial Stability Board, 2019). Once tech resources such as enhanced user experience and services are integrated into existing financial platforms, more than 40% of the revenue could be channeled to big tech firms (Finance and Economics, 2019). Arthur Hughes-Hallett held the thought that the ability to have an insight into both sides of a financial transaction will give companies like Amazon, and Google a unique competitive edge over traditional financial institutions (Finance and Economics, 2019).

Big Tech firms are playing a significantly prominent role in the financial system, and have started to also offer financial services (Financial Stability Board, 2019). This is a big blow to banks who were previously providing financial services for individual clients and companies through lending money to them at low rates (Financial Stability Board, 2019). Big Tech companies benefit from having a bigger customer base and from gathering and scrutinizing their client's information with a lot of ease (Financial Stability Board, 2019). These companies are also able to access capital and funding at a lower cost than other financial groups. In advanced economies (AEs), Big Tech firms' monetary activities are focused on payments, and often complements the activities of existing financial institutions (Financial Stability Board, 2019). In growing markets and developing economies, these companies provide a wider range of financial amenities like lending, insurance and asset management (Financial Stability Board, 2019). This disparity may be due to the discrepancy in financial growth, approaches to financial control, and the penetration of financial services (Financial Stability Board, 2019).

Big Tech company's activities may also pose risks to financial stability. These financial risks mainly emanate from leverage, maturity, transformation and liquidity mismatches, and also operational risks (Financial Stability Board, 2019). Other probable risks stem from how Big Tech companies would use their network and infrastructure to attain high scale in financial services within a short span of time. The rivalry from Big Tech firms could lessen the resilience of financial institutions, either by impacting their profitability or by reducing the stability of their funding (Financial Stability Board, 2019). The broad access to valuable client data may also be detrimental (Frost, Gambacorta, Huang, Shin & Zbinden, 2019).

The scope and intricacy of the connection between Big Tech and financial firms acted as channels for the spread of risk (Financial Stability Board, 2019). These linkages arose from monetary institutions dependent on third party amenities offered by a few Big Tech firms (Financial Stability Board, 2019). Other linkages that arose through Big Tech companies' partnerships with financial institutions and caused the problem of the distribution of financial products (Financial Stability Board, 2019). There was also fear that a small fraction of Big Tech companies could come in the future to dominate, instead of diversifying the provision of certain monetary amenities within some frameworks (Financial Stability Board, 2019). The ability of Big Tech firms to leverage wide-ranging consumer data raised eyebrows for authorities in regards to the policies of governing data ownership, access and portability (Financial Stability Board, 2019).

Big Tech Firms' Activities in Asset Management

FSB reports cited that Big Tech companies can accomplish a greater scale by providing financial services within a short time since they will be leveraging several comparative advantages (Financial Stability Board, 2019). These advantages include brand recognition, proprietary customer data and "state-of-the-art" technology (Financial Stability Board, 2019). The speed of expansion of Big Tech firms into monetary services in several instances been rapid. Big Tech companies have also majored in asset management, most notably in China, but also to a larger extent in other areas (Financial Stability Board, 2019). In some instances, this has been precipitated by the growth in Big Tech's payment solutions, where clients leave balances in their accounts, which can be invested in money market funds as short-term investments (Financial Stability Board, 2019).

Big Tech company's venture into financial services was generally driven by a desire to; diversify its revenue stream; (Financial Stability Board, 2019). By offering access to new financial amenities these firms will be able to grow their revenue streams. Another reason is to access new sources of information such as spending habits and monetary positions of their customers (Financial Stability Board, 2019). The final reason is to complement and reinforce their primary commercial activities, thereby augmenting their customer base and loyalty (Financial Stability Board, 2019).


In conclusion, the report has examined the impacts of the entry of Big Tech firms in the financial industry. Big Tech firms are playing a significantly prominent role in the financial system, and have started to also offer financial services. One of the pros that these Big Tech firms get is getting a broader customer base, brand recognition, and "state-of-the-art" technology. Some of the identified cons that Big Tech Companies could get after venturing into the financial sector include; transformation and liquidity mismatches, and the threat of financial stability in the long term aspect.


Financial Stability Board. (2019). Big Tech in finance: Market developments and potential financial stability implications. Retrieved from:

Frost, J., Gambacorta, L., Huang, Y., Shin, H. S., & Zbinden, P. (2019). BigTech and the changing structure of financial intermediation. Retrieved from:

Finance and Economics. (2019). Big Tech takes aim at the low-profit retail-banking industry. Retrieved from: file:///C:/Users/User/Downloads/Article%20for%20Report.pdf

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Tech Titans Gather in Lisbon to Discuss Future of Finance - Essay Sample. (2023, Mar 27). Retrieved from

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